Hershey's raises chocolate prices

WASHINGTON - For nearly two years, cocoa prices have been on the rise. Finally, that's affecting the price you pay for a bar of chocolate - and there's reason to believe it's only the beginning.

WASHINGTON — For nearly two years, cocoa prices have been on the rise. Finally, that’s affecting the price you pay for a bar of chocolate — and there’s reason to believe it’s only the beginning.

U.S. chocolate giant Hershey’s announced this week that it is raising the price of its chocolate to compensate for abnormally high global cocoa prices.

“Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year,” Michele G. Buck, president of the company’s North American operation, said in a statement. The price increase, which amounted to roughly 8 percent, was effectively immediately.

Cocoa prices have indeed been on the rise. They are up more than 45 percent since early 2013.

Cocoa prices are but one of several factors that together dictate the price you pay to satisfy your chocolate craving — sugar, milk, packaging, processing, and shipping costs all contribute, too — but cocoa prices are an important one. They are also one that chocolate makers expect to fluctuate, because they tend to be fairly volatile.

Everything from poor weather to pests, and even political turmoil in major cocoa-producing countries, can affect its price. Which is why chocolate makers like Hershey’s rarely pass on cocoa price swings to consumers. They factor the volatility into their pricing, assuming that pinched profits today will be followed by swollen profits tomorrow.

But this is precisely why Hershey’s chocolate price hike should raise a few (million) eyebrows. Cocoa isn’t getting more expensive these days because of a short-term supply and demand imbalance; it’s getting pricier because of what is likely going to be a long and sustained inability to make as much chocolate as the world wants to eat. Global chocolate demand is expected to soar in the coming years, but cocoa farmers aren’t likely going to be able to pick up the pace.

Developing countries will drive the bulk of chocolate demand growth. China is already eating twice as much chocolate as it did only

12 years back — and chocolate is still slated to be the country’s fastest-growing confectionary sector through at least 2016, but likely longer. And Brazil and India have seen significant increases in their chocolate appetites, too.

If America’s largest chocolate company needs to adjust its prices, and specifically cites the rising price of cocoa, that likely means the industry is anticipating a gradual and sustained increase. An industrywide chocolate price hike is virtually guaranteed.